Direct: Casinos bet future on databases: find losers and keep them coming in

What casinos want is simple: losers. Their odds of finding are them are getting better thanks to database technology. This ability to identify customers with a penchant for leaving money behind is transforming the gambling business.

"Before 1985, I didn't know a single casino with a direct marketing manager, much less a direct marketing department. Now the opposite has happened. For most casinos, it's a primary strategy," says John Romero, a casino direct marketing consultant and columnist based in California.

The U.S. gross annual wager last year was $304.1 billion. For this high-stakes gaming business, relationship marketing is not just a buzzword; it;s survival. Lessons learned are crucial to success, particularly for the burgeoning Indian casinos legalized by 1988 legislation. (Minnesota alone has 15 new casinos expected to generate $1.5 billion in revenue this year.) As opposed to such destination locations as Las Vegas and Atlantic City, these facilities are for day-trippers. They compete more for leisure time than against each other. And they must know their customers.

Casino managers once knew their big spenders personally and created events for them. As the business grew, credit lines had to suffice as determiners; only the $50,000-credit-line customers made the New Year's party list. But everyone started applying for the maximum, so casinos pursued new ways to find high rollers.

Slot machines, once the favorites only of the little woman, began ascending in stature along with the income of their patrons. Then someone figured out how to hook the slots up to a PC network, and the transactional database was off and running.

Now players sign up for "slot clubs" (or players' clubs, which cover blackjack and other games), swipe their cards through a reader, earn points whenever they play (300 are worth $10 in one club), and spew out valuable information for their hosts.

The ability to track this data makes it possible to develop targeted offers. Casinos sort players by "earning potential," how much they lose. In general, those who play the most, lost the most, so frequency is important. So is ability. Some players, according to one casino exec, are just "dead rock stupid." If database can identify someone who visited the casino 22 times in the past year and lost each time, "we invite him to everything."

"Our success depends on how effectively we identify and incorporate visitors into our database," explains Joseph Hunt, vice president, marketing director for St. Croix Casino, Turtle Lake, Wis. "It's all a natural evolution. There's the gathering of the database, the development of programs, and then it becomes the battle of the databases when competition sets in."

Backed by a decade of Nevada experience, Mr. Hunt did not wait until his casino's TLC Club was operational before exercising his philosophy. He launched a casino floor promotion (a free spin on a prize wheel) and capture 75,000 names within 90 days.

What these databases don't do, however, is capture other types of marketing information. An occasional application form request income, education, occupation and preferred recreation activity information (also used to plan future facilities), but most don't. It takes too long.

"We don't want to make it look like an application for a mortgage," explains Richard Schuetz, vice president of corporate marketing for Grand Casinos Inc., which operates casinos in Mille Lacs and Hinkley, Minn., plus other U.S. properties.

The year-old Grand Advantage Players Club, with more than 170,000 members, uses an "acceptance form," a phrase Mr. Schuetz borrowed from a similar program he launched at the Frontier in Las Vegas in the eighties. Grand Casinos spends about $1 million annually, or between 5% and1 10% of its total budge, on direct marketing.

After capturing transactional data, casinos simply compared cost and earning potential. Mr. Schuetz cites some examples. If an invitational golf tournament costs $300 per player, the casino needs to generate $600 in revenue so it invites players who lose at that level. For a 300-person sit-down dinner, assuming a 30% response rate, the casino invites the top 900 players, or as many as possible, down to an economically feasible level.

Other marketing information--birthdays, clothing sizes, personal interests--may be capture later or through purchased lists. When Mr. Schuetz obtained 30 gallery seats at the recent Northgate Computer LPGA, he selected for gamblers interested in golf. Because geography is important to Indian casinos, zip code selects are common. Mr. Hunt, for instance, mailed to the portion of Wisconsin's half-million hunters who applied for special hunting privileges in his three-county area. But such detail is often unnecessary.

"You don't want to build a bigger mousetrap than the mouse that needs to be caught," says Mary Ross, vice president of direct marketing at St. Croix's agency, Colle & McVoy, Minneapolis.

No gambler's profile exists, "Lifestyle indicators don't mean a thing," says Mr. Romero. "You can study players, get a profile, and do an overlay, but you don't turn up who has an inclination to gamble and who doesn't." Selecting for risk-takers doesn't work either.

"There's not much cold prospecting done in this business," he adds. Instead, casinos shower attention on the thousands who visit. This takes the form of service onsite and direct mail at home. "At least you know prospects and not suspects," says Mr. Romero.

What incentives motivate these prospects is debatable. Club members exchange points for cast or prices. Minnesota's Treasure Island Casino offers its 100,000 Captain's Club members everything from trinkets to color TV's to island trips. Grand Casinos prefers an offer that will come back in the door. Says Mr. Schuetz, "We've found cash works real well. People like cash."

People also like to be schmoozed via the U.S. mail, generally every four to six weeks. Response rates at new casinos are high. For a recent 146,000-piece mailing of scratch-off game pieces, Grand Casinos realized a redemption rate of more than 40%.

"We call it |the excuse.' People are just looking for an excuse to come," Mr. Schuetz explains.

Although everybody is mailing, methods vary from the traditional "show the check through the window" envelopes to embossed, die-cut pieces that ooze expense. But what really works, according to Mr. Romero, is "simply a personal letter. We don't even use brochures any more."

He advocates letters from the general manager showing glimpses of personality. Patrons love them and write back. One soon-to-be widow wrote to request her husband's slot club points before he expired.

"It's a highly personal business. You're trying to build a wall around your customers, and you build that wall with personal letters, he says.

Mr. Schuetz concurs. He prefers a "talking style" to the usual agency product. "One of the real problems with direct mail is that it's written by smart college kids," he says. "That's not my audience."

Dan Foote, who heads Foote Marketing Group, Minneapolis, and is acting marketing director at Treasure Island, takes a friendly customer appreciation approach. "We can't always be slamming them with an offer," he says.

Mr. Hunt stresses spontaneity. Gamblers aren't long-term planners, thus information must be fresh and change often. As he points out: "We're dealing with an urge here, as opposed to a necessity."